APP Scams: A Growing Threat in the UK Payments Industry

According to a recent report by The Payments Association, Authorised Push Payment (APP) fraud has emerged as the most dangerous type of fraud.

The report, part of a comprehensive financial crime survey, revealed that 65% of the UK’s payments industry views fraud as the most pressing financial crime threat. Notably, Authorised Push Payment fraud losses were £459.7 million, down five per cent compared to last year. This comprised £376.4 million of personal losses and £83.3 million of business losses.

This has sparked significant concern among industry experts, who have identified APP fraud as the most damaging type of fraud affecting both businesses and consumers.

APP Fraud: A Widespread and Alarming Issue

The survey highlighted that APP fraud, which involves fraudsters tricking individuals into sending money by posing as legitimate payees, has become a significant issue.

The tactics used in these frauds are varied and include setting up fake websites for non-existent goods and sending texts or emails that appear to be from banks or even friends and family. Despite these different methods, all APP frauds exploit the Authorised Push Payment system that millions use daily.

Industry Concerns and the Need for Action

The Payments Association’s survey, which gathered insights from decision-makers at major UK payments companies, shows that 65% of respondents view fraud as one of the biggest challenges defining financial crime in the next year. Notably, 27% identified APP fraud as the type of fraud that most impacts their companies and customers, underscoring its severity.

Riccardo Tordera, Director of Policy and Government Relations for The Payments Association, emphasized the scale of the problem: “APP fraud is one of the least sophisticated forms of fraud, yet it is highly effective due to the sheer number of people that fraudsters can target. Data leaks have made it easy for bad actors to obtain thousands of phone numbers, and even if only a small percentage of their attempts are successful, it can still result in significant losses.”

Regulatory Changes and Industry Response

The Payment Systems Regulator (PSR) has introduced new rules requiring payment service providers (PSPs) to compensate victims of APP fraud, splitting the liability between the PSP that sends and the PSP that receives the payment. While 58% of survey respondents were aware of this change, the new rules have raised concerns about potential harm to businesses and stifling innovation.

Many companies are taking proactive measures to combat APP fraud, including re-evaluating customers based on risk and reviewing incoming transactions. However, Tordera warns that the current repayment threshold of £415,000 could be disproportionately damaging, particularly for small, innovative FinTech companies. He suggests a more reasonable upper limit of £30,000, which would still be significantly higher than the average scam costs for businesses and consumers.

Calls for Further Action

The Payments Association has shared its concerns with the new interim MD of the PSR, David Geale, following the resignation of Chris Hemsley. Despite the PSR’s reluctance to delay the implementation of the new rules or lower the repayment threshold, The Payments Association continues to advocate for changes that will protect competition and innovation in the industry.

Jessica Bayley

Jessica Bayley is an international author and journalist. She covers global affairs, hard news, lifestyle, politics, technology and is also the author of "The Ladies of Belgium."